What is a prenuptial agreement?
A prenuptial agreement, often known as a “prenup”, is a legal contract entered into by a couple before they get married or enter into a civil partnership. This agreement outlines the rights and responsibilities of each party concerning their financial assets, debts, and other matters in the event of divorce, separation, or the death of one spouse.
What is the purpose of a prenuptial agreement?
Prenuptial agreements typically address issues such as the division of property, spousal support, and other financial matters. While they are often associated with high-net-worth individuals, or couples entering into second marriages, prenuptial agreements can be used by any couple to clarify financial expectations and protect individual assets.
The primary purposes of a prenuptial agreement include:
Prenuptial agreements help to protect the assets that each person brings into the marriage, ensuring that specific properties or financial interests remain separate.
Prenups outline how debts incurred by either spouse before or during the marriage will be handled in the event of a divorce.
Spousal support or alimony
A premarital agreement may establish the terms for spousal support in case of divorce, including the amount and duration.
A prenup can address how inheritance and other financial matters will be handled, particularly if there are children from previous relationships.
Clarity and communication
Ultimately prenuptial agreements exist to provide an opportunity for couples to discuss and clarify their financial expectations and responsibilities, promoting open communication about money matters.
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What happens if I don’t have a prenuptial agreement?
If you choose not to have a prenuptial agreement, the Property (Relationships) Act will apply if your relationship ends.
In a nutshell, the Act states that if you’ve been married, in a civil union or a de facto relationship for more than three years, relationship property will (typically) be divided equally.
In the event of a divorce, the judge will consider some general principles when they divide your relationship property, including:
- Men and women have equal status
- Each partner has made an equal contribution to the relationship so relationship property should usually be shared equally (50:50)
- It usually doesn’t matter if one person is more responsible than the other for the break-up of the relationship
- Unpaid work, such as caring for children and running the home, is equal in value to paid work
It’s worth noting that a prenup legally excludes both parties from the obligations of the Property (Relationships) Act. A couple’s prenup sets out their rights to property, debts, income and other assets that have been purchased together or acquired individually, should the relationship end.
When is relationship property not divided equally?
If the income and living standards of one person is likely to be much higher than the other person’s after the relationship ends, the court can give more to the other person. The court can do this by:
- Ordering one person to regularly give the other person money for a set amount of time
- Giving one person a one-off amount of money or more of the relationship property or some of the separate property
Do I need a prenuptial agreement?
Prenups are becoming increasingly common, for good reason. While bringing up the topic of a prenup is never easy, it can protect both you and your partner if you decide to part ways.
If you decide to create a prenup, keep in mind the following:
- Be transparent about your assets and know what you want to get out of a prenup
- Know when you are likely to become ‘de-facto’ under the Property (Relationships) Act. A good general rule of thumb is that a qualifying relationship usually means the two parties have lived together for three years
- Know when your property goes from being separate to relationship property – also called marital property or community property
Keep in mind too – you don’t have to be pre-marriage to get a Relationship Property Agreement. It can work as a “postnup” if you’ve already married, and even if you’re a de facto relationship and you don’t plan to get married soon.
How do I get a prenuptial agreement?
The best starting point when creating a prenup is to talk to your partner. If they agree to a prenup, then you must seek legal assistance.
The drafting process begins by outlining a couple’s finances and assets. Be aware that you and your partner must seek legal counsel with separate lawyers who understand contract law. As a consequence, most law firms offering prenups include the services of separate lawyers as part of their prenup packages.
The drafting process begins by outlining a couple’s finances and assets. Your lawyer will then clarify your financial rights, legal rights, and personal consequences of the prenuptial contract.
Your lawyer will also need to determine whether the agreement is legally sound, considered fair, and that the two parties did not enter into it under duress or undue influence.
Can I write my own prenup?
While you and your partner are able to write your own prenuptial agreement, it won’t be legally valid if you just knock it up at your kitchen table, sign it together and file it away with your other paper work.
To ensure a prenup agreement is legally valid, it must follow these set requirements:
- the agreement must be in writing and signed by both parties
- both parties are required to have had independent legal advice before signing the agreement, from separate lawyers
- both signatures have to be witnessed by a lawyer
- the lawyer who witnesses each signature must certify that, before the person signed the agreement, the lawyer explained the effect and implications of the agreement.
So prenups need a lot of consideration and professional support. A DIY approach can expose either of you to legal challenges should your relationship end. If your DIY prenup is rejected by a court, you will be liable for a standard 50:50 split.
About the author of this page
This report was written by Canstar Content Producer, Caitlin Bingham. Caitlin is an experienced writer whose passion for creativity led her to study communication and journalism. She began her career freelancing as a content writer, before joining the Canstar team.